Frequently Asked Questions
Is a short sale better for my credit than a deed in lieu?
In terms of FICO scoring points, both typically result in a 50-150 point drop. However, a short sale is often viewed more favorably by future mortgage underwriters because it shows a proactive effort to sell the property at market value rather than simply surrendering the keys.
How long do I have to wait to buy a home after a deed in lieu?
According to Fannie Mae and Freddie Mac guidelines, most borrowers must wait four years before qualifying for a new conventional mortgage. This period can sometimes be reduced to two years if you can document significant extenuating circumstances that led to the financial hardship.
Does a deed in lieu stay on your credit report for 7 years?
Yes, both a short sale and a deed in lieu of foreclosure generally remain on your credit report for seven years from the date of the event. While your credit score can begin to recover significantly after three years, the mark itself stays visible to lenders for the full seven-year duration.
Why would a lender reject a deed in lieu?
Lenders frequently reject a deed in lieu if the property has junior liens, such as a second mortgage or tax liens. Because the lender would become responsible for those debts upon taking the title, they often prefer a foreclosure or short sale to resolve the secondary obligations.